SEC Chair Gary Gensler. Image Credit: Getty Images

AI could cause a “nearly unavoidable” financial crisis if regulators cannot get a handle on it soon, the head of the SEC said on Monday. 

Gary Gensler, the chairperson of the Securities and Exchange Commission, told the Financial Times that the lack of diversity in AI models used by companies could one day pose a significant threat to U.S. financial stability. While various open-source AI models exist, most entities today rely on a small number of tools developed by a select group of players, such as OpenAI’s ChatGPT.

“It’s frankly a hard challenge,” Gensler said. “It’s a hard financial stability issue to address because most of our regulation is about individual institutions, individual banks, individual money market funds, individual brokers; it’s just in the nature of what we do.” Gensler continued that implementing AI regulation would be a “horizontal issue,” because “many institutions might be relying on the same underlying base model or underlying data aggregator.” 

Wall Street has begun introducing AI-powered technology from market monitoring to automating account opening, FT noted. 

“I do think we will in the future have a financial crisis,” Gensler told F